Cisco shares plummet more than 9% on tech spending concerns

Shares of Cisco Systems Inc. slid more than 9% in early trading after the network equipment maker’s disappointing outlook exacerbated worries about government spending in the United States and Europe.

Cisco’s shares — among the top percentage losers on the Nasdaq on Thursday morning — touched a low of US$17.02 in their sharpest fall in more than a year. It was also the most traded stock on the exchange.

Cisco CEO John Chambers said a year ago that the company — once a Wall-Street darling — had ‘lost its way’

“Cisco’s results highlight a difficult IT spending environment but pockets of growth should appear in the second half of 2012 with a hopeful resumption of telco spending,” Piper Jaffray analyst Troy Jensen said in a research note.

Jensen maintained his “neutral” rating on the stock, citing limited visibility into the company’s growth prospects, but lowered his price target by US$1.00 to US$20.

According to Thomson Reuters StarMine, nine analysts rate Cisco stock a “strong buy,” 15 rate it a “buy,” 19 have a “hold” and only two rate it a “sell.” The mean price target on the stock is US$22.58.

Cisco said it was difficult to predict second-half performance.

“We continue to see the impact of the areas of concern we have discussed for the last few quarters … Europe and the global economy, India, and conservative IT spend as reflected in the commentary of our peers,” CEO John Chambers said on a conference call with analysts on Wednesday.

Shares of rival network equipment maker Juniper Networks Inc. were down 4% on the New York Stock Exchange.

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Technology bellwethers such as IBM Corp., Intel Corp. and Oracle Corp. have also made cautious comments about tech spending by governments and businesses.

Chambers, Cisco’s legendary helmsman, said a year ago that the company — once a Wall-Street darling — had “lost its way,” as it struggled with a business that had grown too big and unwieldy over the years.

On Wednesday, he said the continued pressure on government and business budgets was hurting sales of Cisco’s telepresence products — part of the video business that the company has picked as one of its new pillars of growth.

A telepresence system is a suite of applications and products that enhances videoconferencing quality.